South32 faces its first writedown

BHP Billiton spin-off South32 is set to write down the value of its manganese business in the company's first major setback.

The miner has delayed the restart of three of its four furnaces at its South African Metalloys manganese alloy smelter, due to a 20 per cent fall in the price of the metal in the last year.

Manganese alloy is one of the world's most widely used metals and is essential to steel and aluminium production.

But its prices are expected to remain low, similar to iron ore and coal, due to weaker Chinese demand.

South32 said it expects its move to have implications for the fair value of its Samanco joint venture with Anglo American, the world's largest Manganese producer.

No jobs would be lost as a result of the temporary suspension, it said.

The company also flagged increasing its sales of raw manganese ore from its mines - before the metal is smelted.

South32 shares dropped five cents to $2.09, compared to the $2.13 it listed at in a $10.9 billion debut in May.

The manganese business is expected to represent about 13 per cent of a forecast $US2.3 billion in earnings before interest, tax, depreciation and amortisation (EBITDA) for South32 in 2014/15, according to Royal Bank of Canada analysts.

South32 was established after the demerger of BHP assets including commodities such as aluminium, nickel, silver and thermal coal.

It was created to allow BHP to focus on its four core commodities - iron ore, petroleum, coking coal and copper - with a possible fifth in potash.